CFPB Launches Inquiry on Campus Financial Products; Comments Due March 18 (Jan. 31, 2013)
Jan. 31, 2013
The Consumer Financial Protection Bureau (CFPB) today announced it has begun an inquiry into “the impact of financial products marketed to students through colleges and universities” to determine whether these products are “in the best interest” of students. Such products include student ID cards that double as debit cards and cards used to access scholarships and student loans, according to the agency
“We have seen many colleges establish relationships with financial institutions to offer banking services to their students,” said CFPB Director Richard Cordray. “The bureau wants to find out whether students using college-endorsed banking products are getting a good deal.”
Passage of the CARD Act of 2009 has made it virtually impossible for credit card companies to market credit products on campuses. However, many colleges have been adopting programs that combine the school’s student ID with a prepaid card. Within the past 16 months, several campus card programs have been announced or expanded by card providers. For example, U.S. Bank and North Carolina State University last April announced the Wolfpack One Card, a campus ID card and prepaid MasterCard card, and incoming freshman were the first to try it. Dr. Dan Adams, N.C. State associate vice chancellor of campus enterprises, told Paybefore in October that the transition to the enhanced ID card was going well and that the card “has been well-received.”
Despite the benefits of these types of campus financial products, including streamlining schools’ benefit disbursement processes and giving students convenient access to funds, including financial aid, the products have come under fire from legislators and watchdog groups—the most critical example, perhaps, came from a 2012 report by the U.S. Public Interest Research Group (US PIRG) Education Fund, “The Campus Debit Card Trap,” which claimed the cards come with insufficient consumer protections and high fees that can whittle away at students’ financial aid.
The CFPB is soliciting feedback from students, families, school representatives and financial institutions regarding their experiences with these products. The bureau also is seeking input on the information schools share with financial institutions, how campus financial products are marketed, the fees associated with these products, how schools set up marketing agreements with financial institutions, and student experiences using these products.
Instructions for submitting information are located on the CFPB’s Website. The public may submit comments until March 18, 2013.